Great Crash Of 1929 Similarities Suggest Gold Prices Will Soar In 2014

December 16, 2013

A Review Of 1925 To 1929 (i.e. Last 4 years of the Roaring 20s)

gold price increaseDuring the last four years of the Roaring ‘20s, the DOW Stock index roared upward +143%. And during the same period Barron’s Gold Mining Index (BGMI) rose +83%.  But then in October the Great Stock Market Crash OF 1929 began.  During the following four bear market years (1929-1933), the DOW Index plummeted -88%.  However, as frantic frightened investors fled the stock market, they sought safe haven by piling into the precious metal stocks.  Consequently, in the four year bear market stock period (1929-1933) the BGMI soared + 380%...as the Wall Street Stocks were mercilessly hammered downward.

gold prices

For more history  on Gold Stocks and The Great Crash of 1929, see:

http://www.gold-eagle.com/article/gold-stocks-and-great-crash-1929-revisited-0

Fast Forward to the Roaring Last Four Years 2009-2013

Since its low in late 2009, the DOW Stock Index has roared upward +146% in the last four years vis-à-vis a +143% in the four year blow-off period of 1925-1929.  Is this an uncanny historical coincidence…or is it a dramatic déjà vu reality materializing?!

Here is a Stunning Chart showing today’s DOW Index is eerily reminiscent of 1929…ie following the exact same road to oblivion just before October 1929 Stock Market Crash.

(Chart courtesy of Mac Slavo http://www.gold-eagle.com/article/stunning-chart-today%E2%80%99s-stock-market-eerily-reminiscent-1929 )

Do I hear “2014…Déjà vu 1929 To 1935?”

Forecast For the Next Four Years To 2018

The following four year forecast is based upon the assumption we may see a repeat of the 1929-1933 market performance.  But anything can happen in the interim. NONETHELESS, prudent investors must take into consideration history…especially the uncanny similarities of the four year periods of 1929-1933 vis-à-vis 2009-2013.  Like the old sage Wall Street saying,

“History does not repeat itself, but it often rhymes.”

Based upon all the above, here are the projections for the next four years:

Theoretically the DOW Index could conceivably plummet to 1920 level.  However, I really DO NOT BELIEVE the DOW Index will fall that much, but I am certainly NOT going long common stocks in the near future.

On the other side of the (gold) coin, the above historical analysis suggests the HUI Precious Metals Stock Index might soar +326% to 830 by late 2016. This analyst used 326%, because that was HUI’s appreciation during the 2008-2011 period.  Moreover, based upon the parameters of the above historical analysis, HUI 830 might conceivably be reached in late 2016 or early 2017.

To fully comprehend how gold stocks can rise parabolicly, all we need do is look at Homestake Mining stock price during the Great 1930s Great Depression. In the 1920s Homestake Mining was the world’s quintessential gold mining company that represented the entire industry. And from 1925 to 1935 Homestake Mining soared +567%...while Wall Street Stocks were tumbling month after month.  Accordingly, today Newmont Mining(NEM)  is considered the world’s quintessential gold mining company that represents the entire industry. Therefore, if NEM replicates the 1929 to 1935 Homestake Mining performance, then NEM might go ballistic to $150/share. Newmont Mining’s Price Projection is based on Homestake Mining 1929-1935 Performance.  However, additional fuel for the accelerated rise of Homestake Mining was when President FDR increased the gold price from $20.67 to $35.00/oz in early 1934. This time around the U.S. President need not act in devaluating the currency (ie increasing the gold price), as the market will do the honors for him.

gold price chart

The above 1924-1935 historic charts are sourced from:

http://www.gold-eagle.com/article/199899-prognosis-based-upon-1929-market-autopsy

Disclosure:  Today I have long positions in gold and silver stocks. To be sure I will continue to accumulate more gold and silver stocks as the HUI Index forges an historic bottom. In my considered Technical Analysis opinion, HUI, GDX and GDM are very near rock bottom.  Consequently, we will see all three soar in the years to come as the US Dollar is necessarily devalued to pay for the massively exploding US National Debt. The U.S. has no other feasible alternative than DEFAULT ON THE DEBT OR DEVALUE THE DOLLAR…and rest assured Washington will elect for the latter by trashing the greenback, which will catapult the gold and silver prices into orbit.

More by vronsky:    http://www.gold-eagle.com/authors/vronsky

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Founder of Gold-Eagle in January 1997.  Vronsky has over 42 years’ experience in the international investment world, having cut his financial teeth in Wall Street as a financial analyst with White Weld. Vronsky speaks three languages with indifference: English, Spanish and Brazilian Portuguese.  His education includes a degree in Petroleum Engineering from the University of Oklahoma, a Liberal Arts degree from Hartnell College and a MBA in International Business Administration from UCLA – qualifying as Phi Beta Kappa and Tau Beta Pi for high scholastic achievements.  Vronsky believes gold and silver will soon be recognized as legal tender in all 50 US states…and many countries worldwide.  You may reach I. M Vronsky at: vronsky@gold-eagle.com and/or vronsky@bellsouth.net

Gold is the official state mineral of Alaska.